Skip to content

#336 Varsity Blues, Legacy, and Equity: the Challenge to the Philanthropy Sector

April 1st, 2019

Richard Marker

This was first posted on 21 March. Apparently a tech error prevented it from being disseminated to all subscribers.

I was a third generation “legacy” attendee of an Ivy League school. Growing up, I don’t recall too much uncertainty about whether I could go there – only if. We attended football games, my family made annual gifts [although, admittedly, there are no buildings or chairs bearing the family name], and I knew all of the school songs [do they still do that?]

My subsequent career has, I am proud to say, justified their acceptance, but I daresay, looking back, I would have been a marginal applicant today. It is my suspicion that the admissions committee did not have a heart to heart about my capabilities; rather, I was a “legacy; next application…”

In those days, that kind of legacy was sort of assumed. It rarely required an affirmative or expensive buy-in. It was the privilege that accompanied privilege.

We didn’t think about that too much in those by-gone days. I became more aware of it during the 11 years I subsequently spent teaching/working at a different Ivy League school as the world began to change and last names more readily attracted attention. But so did proactive “diversity”. There was the sense that whatever favors names or money or national origin or color brought, they were capable students who just happened to have a leg up in the ever more perverse and competitive admission process. [Along the way, I learned that there was a lot more inscrutability to the process than how much money someone had.] [My son and my nephew chose not to attend the family legacy school, so it is left to our 3-year-old grandson and his cousins to, perhaps, resurrect the chain. But that is a long way off – a good thing given the current financial realities. And only incidental to the remainder of this post.]

In any case, over the past days, there have been millions of words written about the admissions scandals – legal and illegal – in American higher education. What concerns me in reading them is that too many of the op-eds and government responses focus on too narrow a question. Here are some of my responses:

• Let’s be cautious about passing new laws regarding endowments and tax deductability. Bad cases make bad law and too quick a “fix” may saddle us with even bigger problems for both philanthropy and education. Both need fixes – but not headline-driven patches.

• I am struggling with the all too thin line between illegal bribery and legal influence buying. Of course, there is a difference, but they reflect deeper systemic issues that encompass both.

• Underlying the bribery is the reality that that not all favored admission is to the wealthy; it is, though, to the wealth of the school Athletes bring a different financial value to a school. All one has to do is look at how much a university nets from a bowl game or a March Madness slot.

• There is a real issue of what the true meaning of education has become. Here is a case where a very dated marketing device to encourage higher education has come back to bite us: Starting in the 50’s, students were encouraged to attend higher education to enhance their earning ability; true and fair enough. But when earning ability supersedes critical thinking and education as a deep-seated societal value, it loses something. [I needn’t belabor this point: We are paying the price today in the character of public discourse, the absence of critical thinking, and the horrendous lacunae of basic knowledge by too many in the USA.]

• This leads us to the challenge to and of education. We have an ethically abysmal system. Even moderately upper middle-class families cannot afford most elite higher education, and lower middle class are even priced out of State schools. And if one takes a look at the shocking attempts to defund and privatize El-Hi education as well, we have a profoundly cynical approach to the concept of civic obligation toward an educated and literate populace. [I am reminded that Thomas Jefferson and Benjamin Franklin created the first free library out of a belief that a democracy can only function if the demos is literate! How far have we fallen from those ideals?!]]

There are few public policies more transcendent than that of education. With the erosion of the commitment to a thoughtful and thinking population, combined with the sense that, at least at the higher education level, it must be bought, we have a much greater problem than a few wealthy people securing their place in a social caste system.

Philanthropy does not have clean hands in this. After all, the largest gifts typically go to the already wealthy institutions. And while a few outliers like Michael Bloomberg may have committed a 10-figure gift toward scholarships at his own elite alma mater, one has to look very long and hard to find equivalent 7, 8, or 9 figure gifts to the institutions a bit lower on the class scale, but perhaps no lower on the teaching one. Our field talks a lot about equity, power, and the challenge of privilege, but it is rare indeed that our largest investments go to the kinds of investments and grantmaking that redress those societal needs.

More than anything, education needs a major adjustment in public policy – more resources, more affordability, and more genuine commitment to critical thinking. No question that philanthropy can never and should never be expected to do that alone. What we do have is an obligation to make sure that we are using our position of suasion and our resources in ways that narrow the caste, wealth, and learning gap.

If not, we may be sure that Varsity Blues type scandals will continue to cast a harsh light on our privilege.

#334 – Confessions of an Old[er] White Guy: The Changing Faces of Philanthropy

March 4th, 2019

Richard Marker

Tsk, tsk. No, not that kind of confession. And even if it were, none of those youthful indiscretions would rise to the level of what in normal times should be the basis for appropriate exclusion from the Presidency or Supreme Court. Read on anyway.

In the close to 20 years I have been teaching philanthropists and foundation professionals, it has been rare indeed to find any session with more than a handful of men – of any age, race, ethnic background. And when one removes the principals, I.e., those who made or control the money, from the statistics, the numbers of older white men can probably be counted on one hand.

Over that time, it was never surprising to find a seminar populated only by women, and that is also true when I speak to or attend regional associations and other affinity groups in our field.

There has, though, been a noticeable change over those years: more people of color, or of differing national origins, etc. are visible, so from an optics perspective [both meanings of the term], the philanthropy field seems to reflect diversity – albeit a clear gender majority. It is no exaggeration when I report that I am often the oldest, and often the only, white male in a philanthropy room.

[Admittedly, when I have had occasion to work with foundation boards, the mix of trustees does not typically reflect that diversity, although gender balance does seem to be well on the way to parity.]

I write this as our field attempts to deal with an interlocking and complex reality – both internally and as to our larger societal role. By definition, those of us who are in a position to give money away are privileged. For those who have or control the money, that privilege extends far beyond the foundation or grantmaking space; but even for those whose background and resources may be less advantaged, the very roles we all play put all of us squarely in the privilege space. The challenge is how to properly, ethically, and effectively account for that privilege in our decision making, our empowerment of others, and in our relationship to the larger world, some of whom are grantees. If one reads the emerging literature from many others in the field, it will never be simple as long as one accepts that there is legitimacy to having independent funder entities. [Even if one advocates the elimination of those entities, as some do, it is not automatically obvious how one decentralizes and empowers decision making and resource control.]

A bit of autobiographical context. [if that is not interesting to you, please skip the next part.]

I am old enough that I grew up at a time when everyone was either a WASP or a WASP wannabe. There were Catholic WASPS, Jewish WASPS, Black WASPS, what used to be referred to in those days as “Oriental” WASPS. We all dressed, and often spoke, as if we were prepared to take our place in the Manor, or its representative law firms, clubs, and white shoe investment firms. And even if one didn’t quite make it into those circles, every one of the other firms and clubs acted as if they were of that class.

This was a reflection of a time when America was viewed as a melting pot leading to a desired homogeneity – the unstated ideal of which was upper class-ish, Anglophilic, sameness.

I graduated college in December 65, so my undergraduate experience fit that mold. But the culture changes of the mid-60’s challenged all of those assumptions about how we acted, dressed, and affiliated. Suddenly it was cool to be African American – so much so that lots of white males sported Aftros and spoke in Afro-slang. Liberation movements of all sorts – religious, ethnic, gender, national origin, led to changes of attire and décor. Alternative careers were celebrated, along with alternative life styles. Bras were burned, and jeans replaced 3-piece suits. Suddenly everyone was something other than that dreaded milquetoast WASP.

The halcyon days of everyone being an establishment alternative didn’t last long. Soon there was a palpable competition for whose group had the greatest historic grievance. “My group’s suffering was greater than your group’s suffering….” Anti-establishment morphed into siloed diversities.

It is no exaggeration to say that the USA was never the same. Mostly for the better – ]although some of the reactionary responses at this moment in history, emboldened by unconscionable words and behaviors of this administration, should make us all shudder!]

Laws have changed, Hiring has changed. Our vocabulary has changed. Our social realities have changed. And any further discussion needs to, at minimum, acknowledge those changes – even if nowhere near adequate or complete. Nevertheless, how to actually account for that diversity in the centers of power has been elusive. Tokenism, on the whole, has been the response of choice, and, even today, still is in too many settings.

Many well-meaning folks of privilege tried to compensate for that by developing approaches that, in retrospect, can only be called patronizing. To take but one personal example: When I was working/teaching at Brown University in the 70’s, the school had adopted – for want of a better term – Tougaloo College in Mississippi. Brown is as New England establishment Ivy as there is; Tougaloo is an “historically Black Southern College.” Many faculty, myself included, made symbolic visits to teach short term courses. All of us meant well, but were our efforts little more than patronizing exercises in privileged white folks modeling another life style? 40 years later one looks at things quite differently. [For the record, the Senior Chaplain at Brown, Charles Baldwin, did much more and deserves posthumous credit for it. He helped fundraise, coached top administrators, participated with their board, and exhibited a long-term commitment that rose above the self-critique I am applying to most of the rest of us.]

In any case, these times don’t allow that kind of tokenism or patronizing – certainly not in our world of philanthropy. Many [most?] of our field have progressed from know-it-all exhibition of power to an acknowledgement that we haven’t been as smart as we thought. After all, if we had been, illiteracy, homelessness, hunger, poverty, xenophobia and so much more would have become relics of a long-gone era. We have learned that there are lots of folks who know at least as much as we do, or more, about how to implement the kinds of changes we want to enable with our funding.

Over the years, our field has been trying to figure out the best ways of getting that knowledge into the decision-making rooms early enough to make a difference. Hire field of service expertise? Create slots on grants committees for representatives of the served population? Enable safe spaces for grantees to share feedback and assessment with and about funders?

Should that extend to governance as well? Can any funding entity credibly fund in a community or field of service or an at-risk population if none of those folks are in the rooms of decision-making power?

Notwithstanding the serious and cutting-edge work by several prominent organizations in our field, which I applaud, this is never easy. Empowerment of others is hard enough when there aren’t class or racial or ethnic or gender divides. [Ask almost any businessperson.] It is especially hard when our funding catchment includes many of these populations and there may only be space in the boardroom for a very few. The challenge is: can “privilege” be extended with surrendering it? It is not simply an organizational question: it involves social, economic, and many other divides and for all the “metrics” that we can develop, it will always be challenging.

Which brings me to my “confession.”

I have learned that age-ism is real.

I first experienced it when I was 57 years old and was being aggressively recruited by a search firm to be the next CEO of an organization. I was never interested in the position; it would never have been right for me. But I did know someone who was absolutely perfect for the job and told the head hunter of him. His response: “we know of him, but we are looking for someone younger”. That is an exact quote!!!

I told him that the person I recommended, and I were the same age; why was he pursuing me? His response: “Oh. We thought you were younger.”

While flattering, it was a surprising and pretty direct truth that slipped out. As I have become older, I see that the issue is real. There have been speaking gigs and advisory contracts where the choice went to someone much younger, and of a different gender – and have been told directly that age and gender were the reason. When that starts happening more than a couple of times one sees a pattern. If I once had the privilege of an elite education and background and a record of prestige positions, I was suddenly in a less desirable class.

But, before resenting those experiences, I do have to catch myself. Once upon a time I was the wunderkind and was the “youngest” or “first” to do lots of things and I was able to do so because of the advantages I started with. It would be wrong to resent someone else having that turn.

What I and we must never forget is that far too many have never had access to those positions to lose. My own experiences may enhance my empathy but must never be allowed to blind me to those who look at power, privilege, and position from the outside looking in and can only imagine what it is like. As philanthropists, we need to find ever more ways to open the doors and not just the drapes.

#335- The Challenge of Professional Collaborations in the Philanthropy World: A Contemporaneous Example

March 1st, 2019

Richard Marker

Next week, I will be privileged to co-present a webinar for The Chronicle of Philanthropy on the topic “How to Craft Gift Agreements.}

The webinar was organized by the Chronicle and will include a senior development officer representing the view of non-profits, and me – representing the view of funders. In preparation, we have considered many areas that our respective positions and perspectives bring to the table.

The underlying assumption of the webinar is what happens after a funder decides to give – not where the money comes from, not [necessarily] what led to the decision, but what happens now. how does that agreement get articulated, who has what responsibilities, and what will happen in the future?

Underlying my part of the presentation is the concept of “exit strategies” – when funders decide to give a grant or gift to any organization, part of their decision making should include what will make them feel that this was a successful grant, and the grant/gift agreement should reflect those conditions. Clearly, there must be mutual consensus that these expectations are do-able, and consistent with the scope of funding and organizational capacity. [Tune in for more details.]

My co-presenter, Felicia Murphy-Phillips, is a very seasoned and senior development expert who has tremendous experience in this area – with a scope of knowledge that should prove very helpful to her fellow development professionals who may fall into the trap that getting the funds is the end of the process. My part will share insights into the thought processes of funders, and, for funders who may be attending, how to fine-tune their own thinking.

I write this now, not as a publicity for the webinar since, without question, the reach of The Chronicle is far beyond my own, but to comment on an unanticipated on-line conversation related to this webinar.
Some wealth managers, looking only at the title, viewed this webinar from a very different vantage point. From their perspective, they presume that it is to be about the funding vehicles that accompany or enable a “gift”, such as different kinds of trusts, or the tax savings that may accrue. In other words, their professional perspective on philanthropy is not related to the perspective either of us presenters will bring to the table.

Now, admittedly, where the money comes from and how the financial component is structured matters, especially to the recipient organization. [and it will be alluded to in passing by Ms. Murphy-Phillips]. Rarely, though, is that an issue for a funder related to the topic I have been asked to address. Once a funder has decided to give for any charitable purpose, his or her primary concern is what will happen to that money once it is given. That is when the expectations and exit strategy concerns come into play. The financial vehicles, at this stage of the conversation, are, at most, incidental.

These comments are in no way intended to suggest that the wealth managers are not doing something important to advance philanthropy – only that it is not directly related to philanthropic decision making,, only its financial enabling. The title of the webinar, I now see, suggests very different content depending on what hat one is wearing.

As one who has attended and spoken at many wealth conferences, this disconnect does not surprise me at all. Indeed, many long-time readers will recognize that this is not a new issue at all. It is worth reiterating that, when T & E attorneys and wealth advisors talk about the value of professional collaborations, they rarely if ever, include a philanthropy professional on their list of colleagues with whom they aspire to collaborate. Is it because their view of philanthropy is limited by their own professional perspectives or that they simply don’t know that there are folks like us who bring a very different level of expertise about philanthropy to the table?

So, by all means, it will be great to have colleagues from those disciplines as participants in next week’s webinar. But please don’t be surprised when the content has everything to do with the respective and interlocking interests of the non-profit and the funder, and not about the financial vehicles that got them there.

What’s in a [Brand]name? Introducing the Institute for Wise Philanthropy

February 20th, 2019

Richard Marker

“It is hard to say ‘no’ graciously; it is even harder to say ‘yes’ wisely.” [from “Four Laws of Philanthropy: Hubris vs. Humility”]

It seems that the philanthropy sector is awash in a re-branding frenzy. Just this week, as this was being written, 2 prominent organizations in our field, Guidestar and the Foundation Center announced that they will henceforth be Candid. Not very long ago, 2 organizations of which we are members changed their brand names: The Association of Small Foundations became Exponent Philanthropy. Grants Managers Network became Peak Grantmaking. I am told that another organization of which we are members, WINGS, is considering a name change as well. The Forum of Regional Associations of Grantmakers has become the United Philanthropy Forum. If one adds local organizations, the list could go on and on.

In the scheme of all of this, our re-brand is quite modest. It is not intended to signify any change in what we do, only how to make it more clear to colleagues and others in the philanthropy sector around the USA and around the world.

The name of our firm derives from the quote with which this post opens. It is from one of the first published articles I wrote on philanthropy practice and affect, about 2 decades ago. I was far from the first to make the various observations in that article, but it got a lot of attention – and helped launch my career as a speaker, educator, and advisor that began a couple of years later, after the foundation I was heading closed. In 2002, I joined my wife, Mirele Goldsmith, PhD, an independent program evaluator, and we launched “Wise Philanthropy.” We have also had the pleasure of periodically joining other outstanding colleagues who have been partners in particular projects.

We chose the brand “Wise Philanthropy” to convey the message embedded in the quote. We wanted to help people learn how to make decisions that were correct for them, informed by the highest ethics, the best practices, and the goals that they wanted to achieve. Wisdom is more than knowledge, but it does require knowledge; it is more than experience, but it benefits from experience; it goes beyond intelligence, but it is hard to have smarts without some smart. It is taking all of that and applying it to the often hard but extraordinarily meaningful decisions that every thoughtful funder must make.

Subsequently, since much of our work is as philanthropy support educators to the funder field, we started referring to our educational portfolio as the Wise Philanthropy Institute.

Why a name change?

As said above, in the scheme of these things, our brand name adjustment is exceedingly modest. But over time we have learned that “Wise Philanthropy” defined our aspirations, but not adequately what we do, and we spend a lot of time explaining what that is, and, as important, what we don’t do.

Why did we decide to re-brand? Well, if one is asked the same questions over and over, it is clear that our title isn’t exactly right. Too often we have to explain at least some of these seven areas.

1. Our business model is a boutique/niche approach so even in the field of philanthropy advisors and evaluators and educators, what we do isn’t typical.

2. We don’t work for or have the family name “Wise”. Many people ask who the Wises are. Hopefully, the change will make it clear that “Wise” is an adjective, not a noun.

3. We don’t manage anyone’s investments – although we are sometimes asked to help think through investment policy concepts that help align with values. And since we often present at investment conferences, it is an easy but mistaken assumption.

4. We don’t manage anyone’s giving or even propose grantees. Since most philanthropy advisors and advisory groups do help manage at least some part of the grantmaking process, it is another easy misperception. If a potential client is looking for those services, we are more than happy to refer them to other first-rate groups.

5. We don’t accept retainer contracts since we want any recommendations to be fully independent and never appear to be self-serving. To be clear, retainer arrangements are responsible and widespread; our model is not a judgement about those who do so. We recognize that our business model is very untypical and often surprises funders and foundations who have worked with other firms or advisors.

6. We don’t do any fundraising nor accept any development related contracts. Some professional advisors are comfortable working on both sides of the table; we have chosen to restrict our work to those who give, not those who raise.

7. We are not connected to a firm with a similar name based in Switzerland. They approached us when they first started to see if there was an IP concern, but since they have a broader organizational consulting practice than we aspire to, we felt that we were not really competitors. [This issue arises in Europe but not in the USA.]

The re-branded Institute for Wise Philanthropy allows us to emphasize our commitment to help people learn how to make appropriate decisions independent of us. At the end of the day, we realized, we are educators and trustees, teaching HOW to make decisions, not primarily to recommend decisions; HOW to improve practice or programs, not primarily to prove their worth; HOW to set policies for grantmaking or practice or investments, not primarily to be the ones who set those policies. We choose to emphasize the learning in our model, whether in our directly contracted advisory work or in our educational work or in our writing, since it suggests a more iterative role and constantly evolving knowledge. We are successful when our clients or “students” or fellow trustees can implement what we have taught or advised independent of us.

What is it, then, that we do?

We are committed to improving the quality of the field both as educators and as advisors. For over two decades we have devoted ourselves to addressing
• funder culture,
• funder alignment,
• improving organizational learning,
• funder and organizational ethics,
• strategy development, especially in the intergeneration and succession spaces,
• “equity” screens for funder behavior,
• utilization based program evaluations.

Much of this has now become mainstream in our sector – first rate and well-known organizations such as GEO, CEP, NCRP and others have made that so and deserve a huge amount of credit. We are quite proud that we have been addressing these issues for many years. Hopefully, with our new focus, we will give more visibility to our thinking to engage with our field more collaboratively, and at a more formative stage.

We do our work in a variety of contexts:

a. We work directly with funders as advisors or trustees to help them learn about and how to implement funding and policy decisions within their own context, and how, when, or if to use appropriate evaluation methods with their grantees.

b. We educate funders from around the world at both NYU and at the University of Pennsylvania’s Center for High impact Philanthropy and, over the years, have done so at numerous other universities and organizational settings.

c. We educate funders and foundations’ trustees and staff within their own foundations.

d. We speak extensively to affinity groups, philanthropy associations, and at conferences in the United States and elsewhere in the world.

e. We write about philanthropy, its challenges, its changes, its opportunities, and, yes, its foibles.

f. We are sources of informed opinion by journalists and have been quoted in many periodicals both within and outside of the USA.

g. We produce proprietary educational “cases”, “how-to” workbooks, and other material of use to funders.

Shortly, we will be rolling out a new website, be making 20 years of articles and our workbooks more widely accessible, and re-positioning our blog so that we can implement our expanded commitments to the field. As always, we welcome your feedback and inquiries, and look forward to long-time mutual collaborations in pursuit of what philanthropy stands for and should help enable: a more just and equitable world.

It may indeed still “be hard to say ‘yes’ wisely” – but with this re-branding, we are renewing our commitment to help our colleagues and our field do exactly that.

#333 – Medicare for All, Equity, and the Philanthropy Question

February 11th, 2019

Richard Marker

When I first started writing this article, it was intended to focus on how and why “Medicare for all” has become a screen for concepts of equity and fairness in the United States. Indeed, it has become an early metric for where on the Liberal/Progressive continuum Democratic 2020 candidates position themselves.

In an addendum below, I will address my thoughts on this question, but as I was writing them, I realized that my key issue has more to do with the gaping chasm between those few who have and the massive numbers of those who don’t.

Most readers, I am sure, recall the “Occupy Wall Street” movement of a few years ago. There were some tactical and strategic errors that their leadership made so the initiative fizzled. Yet, it did serve the purpose of changing the vocabulary of how we discuss the impact of public policy on matters of wealth accumulation. We became friendly with some of the key organizers and felt comfortable associating ourselves with the main thrust of their rhetoric. We are very far from underprivileged ourselves, but, as the chant went: “we are [among] the 99%”.

We were not the only ones in our position to join in the marches. I, for one, chose to wear my customary bow ties and bespoke suites since I wished to, semiotically, emphasize that this was about policy and policy includes all of us. Professionally and personally, we know many people who do fit into that 1% category and most [but far from all] of them readily acknowledged that there was inequity, injustice, and a disproportionate disparity between the very wealthy and everyone else. Many wealthy and super-wealthy people were more than willing to affirm, at least in private, that the protesters were correct, and they and other people of great wealth could easily double their own taxes and not feel a thing.

It appears, though, that their own lobbyists didn’t get the memos so when the tax sham was passed in the current administration, it only widened the divide. I haven’t done a survey myself, but I suspect that many of the same wealthy folks I spoke to in the Autumn of 2011 would privately give the same answers regarding equity and taxes. But now that we have an administration and cabinet led by those with extreme wealth, it appears that the special interests of the wealth class take precedence over everything else. That means a willingness to push to violate decades old contracts for social security and Medicare for the masses of people in order to preserve those tax reductions for the few.

History doesn’t look kindly at this vast a wealth divide and those who want to learn from history should look very carefully about whether our current inequities are sustainable.

I for one feel that the only way to preempt some of those cataclysmic possibilities is through a change in public policy toward taxation. [Just as Medicare for all has become a metric in the political discourse, so has the issue of whether wealth above a certain level needs to be taxed at substantially more progressive rates. [None, we should note, are arguing for the rates that existed during the Eisenhower years.]

When I have publicly articulated these advocacy positions in some circles, one of the predictable objections is that I am advocating a redistribution of wealth. They are quite correct – but after all, I rebut, how to explain the growing wealth divide except by a legal wealth redistribution in the other direction. Rhetoric aside, all some of us want is to redistribute societal resources to a more equitable balance. Some of us think it is simply unacceptable for hunger, illiteracy, poverty, to exist because of policies that reward “wealth beyond the dreams of avarice.”

We in the philanthropy world are in a sensitive place in this conversation. After all, much of the best-known philanthropy exists because of the decision by those who have accumulated more than they think they will ever need to have some of their personal resources transferred to public good. But even though the resources are transferred, a huge amount of control remains, the power imbalance is sustained, and, if done without sensitivity, becomes just another display of privilege.

It is my view that philanthropy should always understand our role vis a vis public policy. We alone cannot eradicate systemic social ills. Our analysis of the best use of our financial and other resources should always include a determination of what each sector can and should do more effectively. I cannot imagine anyone believes that private voluntary philanthropy is equipped to eradicate hunger, illiteracy, homelessness, disease, and public safety on our own. We may have a role – there is legitimate debate about how extensive that role should be – but none can seriously believe that we have the capacity to solve the problems on our own.

That does mean that addressing public policies and social weal, including about taxes is essential to what we are about. As unique and distinctive as our sector may be, it may not, must not, exempt itself from addressing the inequity that tax policy fosters.

Of course, that will have an impact on our foundations, and our own wealth accumulation. It is a fair price to pay to correct for the radical, systemic, but fully legal inequity that has only become much worse since the Occupy Movement chanted and marched.

In many ways, our philanthropy sector is ideally suited to take the lead on this. Since we are identified with the privileged class [even though only few of us are at the rarified mega level], our voices carry a moral suasion to policy makers, and affirmation to those in need and at risk. We know that our legal and moral legitimacy mandates our commitment to public good.

We must affirm that there are profound risks to the stability and future of our nation if we don’t.

Addendum: Some thoughts on “Medicare for all”

On the surface, this should be a no-brainer:

1. The USA is the only first or second world nation with no societal commitment to provide health care to all of its citizens as a matter of right and justice [and practicality].

2. Any insurance plan is more financially viable when it includes low risk as well as higher risk. Medicare is expensive now because it is restricted to the highest user population. It would assuredly be more affordable for all if it included all.

3. Many people misperceive that Medicare is a gift offered by a benevolent Congress. In fact, all of us have paid for it from the day we first earn a pay check. To date, it has been a contract where the payback is only offered to seniors and certain others.

4. Medicare for all is NOT the same as a government run health system. Quite the contrary, we choose our own plans and physicians, with Medicare being the insurance of first claim. It is a total [and often willful] misrepresentation when anyone decries government run health care as the same as a single payer insurance program.

5. If the money individuals and companies now pay for private insurance were added to the mix, it is highly likely that the gross cost of medical insurance would drop. [I will trust folks at places like the Peter Peterson Foundation to crunch the numbers.]

6. It will eliminate the uninsured, a major drain on health care institutions. One way or another, those costs are rolled into the fee determinations we now pay. If there are no uninsured, there will be lower costs for all of us.

7. Most Medicare recipients also purchase supplementary insurance plans though the private insurance market. There shouldn’t be any reason that that cannot continue as an option..
There are legitimate concerns

8. Even if the long-term costs will prove to be lower, there will be transition costs. While I believe those transition costs will be temporary, I am not naïve to the fact that they will exist.

9. An entire insurance industry will need to be restructured and, from a political perspective, that won’t be simple even if the larger public policy benefit is clear.

10. For many employees, health care insurance is covered by employers. [Those coverages are far stingier than they used to be.] That shouldn’t be a long-term issue since it simply would require employers to redirect their payments to payroll taxes from private insurers, but, as in 9, it will require a comprehensive transition.

As I see it, this is pretty straightforward. Why do we hear that it is too radical, un-American, or too expensive?

For some, any increase in government involvement in anything is anathema. It doesn’t matter whether it is financially beneficial or more humane – they simply don’t believe in the active role of government. To those folks, there isn’t much I can say since those ideologues have their minds made up.

For some, there is fear of change even when they acknowledge that profound inequities exist in our current system. To those we need to provide quick wins and a commitment to as little bureaucratic log jamming as possible.

For some, there is still a widely held perception that, for all of its faults, the current US system is superior to others. Sadly, the data doesn’t demonstrate that now, even if it ever was true,, but we need to find ways to show individuals that their own access to health care will be easier and less expensive than what they currently have.

And if any have doubts, all they need to do is ask those of us who are currently beneficiaries of Medicare what we think. Millions would be thrilled if they could have it too.

#332 – Values Based and Impact Investing: Who is leading the way in the Philanthropy Sector

February 7th, 2019

Richard Marker

In a recent front-page story in the Chronicle of Philanthropy [“Doing Well and Doing Good”, 8 January 2019], Marc Gunther reported on an in-depth analysis about how many of the largest foundations are or are not using “impact investing” as a significant part of their investment strategy.

Not so surprisingly, he found a wide variation, although somewhat more surprisingly, he found that some of the foundations most outspoken about certain issues such as the environment and social justice do not apply impact or social value investment strategies on their investment side. Of course, some do, and many others have made their long-term intentions to do more quite clear.

In this post, I would like to add a bit of nuance and a different bottom line about where the philanthropy field is at this time.

Exactly what “impact investing” is has inspired a good deal of debate. Is it the same as “values based” investing? To illustrate how complex this question is, permit one very personal example: When I mentioned our personal investments in a company developing solar fields in Africa to a prominent expert in the impact investment field, one who takes a fairly purist view of the term, s/he needed to be convinced that what we did was a true “impact investment.” Our decision was based on an attempt to apply a series of values screens and a conviction that the ability to use renewables rather than fossil fuels would allow these nations to leapfrog a dated and destructive infrastructure. The social and environmental intervention persuaded us, and the “financials” persuaded our advisors. However, the above mentioned expert said that until there was a deeper analysis of the underlying impact and metrics, it was not yet a proven “impact investment.” S/he did not say it was a bad thing to do, only that it might not rise to the level of a true impact investment.

Therein lies a tale – but first let’s go back a decade or two.

Philanthropists and foundation trustees used to [forgive this gross generalization] accept an iron clad wall between the investment side and the philanthropic spending side. A few outspoken outliers used the shareholder activist tool to challenge tobacco companies, resource sourcing, and a few other values screens, but they were the exceptions.

A very few even challenged personnel practices internal to those companies or in the companies that were providing services or resources. Mostly, though, the practice was pretty consistent: trustees followed the leads of their investment managers – “our job is to make the maximum amount of money so that you can spend your money toward social good.” Indeed, in those days, investment managers were quite convinced that values-based investing, no matter what screen you chose, required that a funder accept concessionary returns – i.e., trade off income for values.

A series of convergent factors began to challenge that: some of it was coming from idealistic b-school students and graduates who believed that doing well by doing good should be a realistic aspiration. [Elsewhere, I have challenged the conviction that only for-profit solutions can solve social needs.]

The second major challenge to the traditional divide came from within the philanthropy world itself. Many began to ask about why only 5 cents on every foundation dollar were going to social good and 95 cents ignored it. That doesn’t seem right, especially when it could be shown that the investment and the program teams were functionally cancelling each other out, and the legal enabling of a foundation or donor advised fund requires that it be for social good.

Therefore, values-based investing emerged as a logical vehicle. It served the larger interests of those who wanted to feel good about their financial aspirations and allowed a rethinking for philanthropy folks to see if there might not be a better alignment.

Unlike Marc Gunther’ well documented piece, these next sets of comments are not based on structured research, but I have been in the field for a long time and am invited to speak and participate in both impact investment conferences and philanthropy gatherings on a regular basis. So, while the next set of generalizations may not be scientific, they are more than a random collection of anecdotes.

Whether or not one views them as synonyms, my observation is that “impact investing” and “values-based investing” are now mainstream. Being mainstream does not mean that everyone does it, but it has become part of the consciousness and planning of many philanthropists and investors. Indeed, while a decade ago, at investment conferences. impact investing was an outlier topic reserved for the “soft” session on philanthropy, the legitimacy of which was frequently challenged by wealth managers. Today, entire conferences talk about many investment opportunities independent of any philanthropic motivations, and values-based investing is integrated into most of those same conferences. There is now plenty of evidence that, when done with the same diligence as any other investment, there is no need to view the returns as “concessionary” and the market opportunities are growing.

Among many smaller and medium sized foundations, the alignment questions are very real and may even be easier to implement than for larger ones. How much or what percentage or what values or which methods are the best are all topics of active debate, but rarely are they not on the table. Often any resistance is not with the funder but with an outside investment manager for whom this still doesn’t compute with longstanding planning orthodoxies.

If my observations regarding the field of non-mega givers is in any way accurate, it reflects more of a sea change than was suggested by the findings reported in the recent Chronicle article. Why might that be?

Every society has had royalty or aristocrats or oligarchs whose wealth was massive, and whose philanthropy was very visible. That was true before modern times, and in virtually every society today. However, what often defines the more authentic philanthropic character of a society is the behavior of those who are successful but not so that their lives are fully removed from those who are not wealthy. The more authentic story of philanthropy always has been about the merely rich or the not quite so wealthy more than the mega. [I write this at the conclusion of the recent government lock-out in the USA. If one wants to understand the difference of world view, listen to the tone-deaf comments of the super wealthy in the administration regarding how people should be able to deal with the sudden deprivation of a pay check.]

To return to a very personal perspective, it is admittedly not so easy to be fully values based invested. There are many new “social” mutual funds, but upon close examination, they have a lot of overlap. Even for not-so-deep pocketed investors such as we who are committed to move fully into the values space, it isn’t so easy to develop a proper investment strategy.

If one has huge amounts of money that must be invested, it is not so simple to consistently apply values screens. Even many of the largest polluters have invested heavily in alternative energy solutions. Alternative and direct investments of all sorts matter, but they usually require more intensive due diligence. To be sure, the mega funds have more resources for that due diligence, but even with that, a good deal of money finds its way into traditional investment vehicles.

However, the reason I think that a deeper dive into the philanthropy field would find more active engagement than reported in the article is that with less money come more low-cap or local options. Or more to the point, there is less need to have philanthropy funds invested in the large-cap type stocks and funds. A more modest, even if well-heeled, funder can engage in local affordable housing or career changing projects, or alternative energy solutions that are too small for the fund managers of the mega funders to consider. Shallow pocketed funders can choose to put funds into one or more of the growing number of values defined mutual funds. They can extend loans to local non-profits to cover cash flow or growth strategies or government shutdowns because they have the relationships that allow both good due diligence and hands on local knowledge.

This does not mean that every funder with more limited means is using our resources with a values screen [nor, for that matter, am I suggesting that mega funders aren’t] – only that it is easier for those funders to choose to do so, and, to the point raised by the Chronicle, to have those investments be a larger portion of one’s investment portfolios.

Not that many months ago, the largest investment company in the world, Black Rock, announced that it was now applying an ESG [Environment/Social impact/Governance] screen to all of their investments. Their conviction is that, over time, it is not only the right thing to do ethically but also will yield superior investment returns. Many now argue that values based/impact investments will soon be the norm and those categories will be as central to investment strategies as financial due diligence. When that happens, the mega foundations will be right there.

Until then, though, it may well be that many more modest funders and investors are leading the way.

#330 Alignment-Staffing: Who Should Do All This Stuff?

January 22nd, 2019

Richard Marker

This post is the third of a series on “Alignment” for funders – aligning our values, our staffing, our funding, and our intentions. Clients and those who have participated in our educational offerings are well aware of this thinking, but I have not previously published these practica. Please see #326 and #328 as the other installments to date. Others may follow in due course.

The series focuses on necessary preconditions for the successful implementation of a funding strategy. It assumes that readers already have chosen what kind of structure within which they are making these decisions – e.g., a private foundation or a DAF or an LLC, et al. For those readers who are still deciding among those options or when to use which, please feel to be in touch directly since those choices are beyond the scope of this series.

It was a brand-new foundation coming into existence as part of an estate. The funder had no direct heirs and even the relatives he named to the new board did not live near the locale of the foundation. This was the first meeting of the new foundation board and they wanted to do it right. We had worked our way through all of the strategy processes with few stumbles, and general consensus on almost everything. It was time to put it all together. One of the board members tried to summarize: “we want to make a lot of grants in these areas and we don’t want to spend our money on staff and other overhead.”

When I asked who, then, will do all the work of soliciting and reviewing all of those many grants, preparing material for the board meeting docket, maintaining connection with grantees, and all the rest, they were stumped. The board members were geographically dispersed and professionally diverse. Their desires were inherently contradictory. In order to implement everything else they had worked so hard on would require rethinking their seemingly diametrically opposed preferences on how to manage their grantmaking process.

Many readers, I know, are members of Exponent Philanthropy, perhaps the largest affinity group of funders. For many years, it was known as the Association of Small Foundations. As far as I know it is the only organization that defines its target market by the number of staff. “Small” is not the size of the asset base but by the size of the staffing – from 0 to 3 or 4. There are members with assets of over $B and those with a corpus a small fraction of that – but in each case they have chosen to do their work without a large staffed infrastructure. [full disclosure: we are members and have had a connection with this organization for many years.]

In recent years, there has been a surge of new foundations of a substantial size. I have been asked if there is a formula to determine how many staff they should plan on. It is a good question, but one that doesn’t lend itself to a simple formula.

In fact, this stage of alignment is determining who will do all of the work of being an effective funder. And while it may appear easier for funders and foundations with deeper pockets, they too must make careful determinations. What we will see in the choices below is that it is not a matter of how much money one has that determines what the staffing needs are, but rather how one best manages the philanthropic dollars at one’s disposal consistent with one’s philanthropic aspirations.

Below are a range of options – and the underlying arguments when each makes the most sense. Some of these are more tax advantaged than others, at least in the short run, but every study has shown that tax favorability is not [and should not be] the primary motivator in the decision, and too much reliance on tax avoidance may lead to unsatisfactory philanthropy..

A. The Dining Table Model: Yes, there are indeed circumstances when the old-fashioned dining table model makes the most sense. When the numbers of stakeholders or decision makers is small, when control matters, when the cost and bureaucracy of other models seems superfluous and intrusive, the most reasonable way to proceed may be to keep things intimate and unstructured. Intimate and unstructured need not mean that there is no strategy, only that the principals prefer the immediacy of keeping things close at hand and as non-bureaucratic as possible.
.

A variation on this is the growing popularity of Giving Circles [a very old model now seeing a resurgence] – where groups of folks put money into a pot and make joint decisions. In most cases, these are self-directed and unstaffed.

B. Outsourcing:

1. The Outsourced Back Office Model: For many, the real motivation of being funders is doing the funding. Relating to potential and actual grantees, thinking through an appropriate involvement strategy, struggling with the hard decisions of yes and no are both the privilege and reason for engagement.

But nothing could be a greater turn off for these folks than having to push all those papers – tax forms, check writing, record keeping, COI files… they all have to be done but why not let someone else do it. Many outsourcing firms have real expertise in this area so they can relieve the burden for funders to do what they want to do.

This model can even apply when there are program officers and other professional staff. [see C.2. below.] Some foundations simply want to devote all of their energies to the actual grantmaking side of grantmaking.

2. The Outsourced Grantmaking Model: Some of you may raise your eyebrows in surprise at this one. But in fact, there are some funders who accept the responsibility of allocating money under their auspices but find actual involvement in doing so to be uninteresting.

This model works best when other internal structures can handle the administration It might be a family office or a corporate related foundation. In those cases, there are likely to be lawyers, accountants, bookkeepers, and office managers who can handle everything except the grantmaking. An outside group or a philanthropy advisor can then handle all of the grantmaking due diligence and prepare board books for the times when decisions must be made. Funders are free to make the decisions, but they are not sufficiently committed to or excited by their obligation to want to spend extra time on it.

3. Outsourcing Both: Some folks would like to outsource both the grantmaking and the back-office work and only participate in the final decision making. There are many reasons why: the foundation or funders’ priorities may have a very circumscribed mandate. Or perhaps there is a funding vehicle that will only be capitalized as part of an estate or another liquidity event so the grantmaking process is really quite minimal. For funders who are willing to surrender control but still participate in decision making, Donor Advised Funds are an example of an all-in-one solution. As the data shows, they are proving quite popular since DAF’s have grown exponentially over the last few years.

For those who wish to maintain more control or at least maintain that option into the future, there are other ways of accomplishing a full outsourcing approach when one wishes to maintain more control. Some consulting firms offer these same services to individual donors or private foundations – providing full service outsourcing to the degree a funder wishes to avail him or herself of them.

C. Employing staff: While outsourcing has advantages for many, especially at early stages, having one own’s staff to help implement a funding strategy often becomes a logical option. After all, it means that the staff is working for you, and can respond to your needs at your pace and in ways that serve your needs. There are three stages of “in—housing”:

1. Support staff: As in “B”above, many funders find the experience with grantees and in community initiatives to be the gratifying part of this work. What they don’t find gratifying is the process of getting there. Having support staff who can organize all of the paper work – from proposal sorting to check writing to appointment scheduling – relives them of that part of the work, necessary though it is. Because this staff [person or people] is/are hired directly and accountable only to the funders, the range of activity and responsibility can be adapted and adjusted as necessary. At the same time, funders can be focused on where they much prefer to be, being funders..

2. Program staff: One level up is hiring professionals to be more directly involved in grantmaking practice. There are a number of reasons for doing so: it allows a professional to run interference with those who want funders’ support; it allows for more intensive due diligence and professional level pre-screening; it expands the reach of the funders by having someone able to represent them in a broader range of communal activities; and, if the program staff brings a professional expertise, it allows a more sophisticated understanding of the funders’ fields of interests.

A key decision at this juncture is what core competence is most relevant. Should one hire a generalist who has knowledge of or experience with the philanthropy field or should one choose a subject matter expert in your field or fields of funding. For large and very large foundations [see below], one might do both, but for smaller staffed grantmakers, there probably are not resources to have both a content specialist and a generalist.

A functional rule of thumb in thinking this through is how specialized and focused one’s grantmaking. If one’s funding is place based, and includes a wide variety of fields, a generalist may be much better able to coordinate whatever is necessary [and even to subcontract analysis or evaluation]. However, if one’s funding is very specialized or field based, content specialists may be a better choice.

The number of program and grants management staff will depend very much on two key variables: how open and competitive the funders’ processes are and how involved the funder wishes the staff to be with the fields of interest and their grantees. A funder who makes a very limited number of grants to a predetermined group of grantees needs fewer program staff than one whose style and approach is to have deep involvement with grantees, and work across a variety of fields of interest.

Let us underscore that, in this option, the principal and/or trustees are making the executive choices and the program staff, however large, is providing the most informed choices for them. However, as the staffing and complexity level grow, many funders will choose to move to the next stage. NB: as will be reiterated below, this is not a question of how large the asset base, but the preferred role of the trustees and principals. There are many quite large foundations – especially family directed, that, titles notwithstanding, choose this as their preferred model.

3. Executive Directed: When a funding entity gets to certain level of complexity, and there are numerous staff to supervise, many funders will choose to hire a professional to provide executive direction. There are a variety of models [beyond the scope of this piece] about whether an ED is preferable to a President/CEO, whether the CEO should or should not be a voting member of the board, and how much authority should be delegated.

A crucial condition for success of this model is that, whatever title that chief professional has, he or she should be the primary liaison to the Trustees and be the person who provides staff direction for other staff members..

When a funding entity chooses to move to an executive led level, its board and the principals need to accept new disciplines in the effective management of their funding. If they continue to prefer to “micromanage” or oversee the staff themselves, they would do better to revert to some variation of “2.” As suggested above, this is NOT a question of how much money or how many staff, but rather the role the funders choose to have.

No matter which model a funder chooses, a number of key questions need to be answered. In looking back at the options discussed above, answering these questions may help direct funders toward a clear preference for one or another of the above models..

1. Who will make the key decisions?
2. Who will gather the relevant information to make those decisions?
3. Who will keep financial records?
4. Who will keep program records?
5. Who will keep board records?
6. Who will make sure that bills are paid – including timely payment of grants?
7. Who will prepare and file the tax returns?
8. Who will manage the assets?
9. Who will maintain or manage the relationships with grantees?
10. If any or all of the functions are outsourced, who will manage those relationships and oversee those functions?
11. If there are staff, who will hire, supervise, and coordinate the staff and staff functions?
12. Who will communicate with and convene the trustees?
13. How will you know if the model you are now using has become too burdensome, not adequate, in need of revision, or other change? [Hint – it is probably worth looking at every 3-5 years.]

This article does not attempt to recommend a particular approach or formula to decide what should work for everyone -even if your goals and asset base is the same as another funder or foundation. Rather it is to give a framework for making sure that it all gets done, and in a way that aligns with the styles and preferences raised in the prior articles on alignment.

When that happens, grantmakers are far more likely to find the process of being funders gratifying and they will have the greatest desired impact with the resources at our disposal.

#331 Publicizing Client Names: Responses from the Field

January 14th, 2019

Richard Marker

A couple of weeks ago, in post #329, I asked readers to respond to a professional query: Whether to publicize or not to publicize the names of clients.

The question I posed was whether my 2-decade plus practice of NOT putting the names of ANY clients in writing was an unnecessary and counterproductive stringency, or an optimum best practice. Any cursory glance at the publications and websites of others in the field of philanthropy advising shows a wide variation on how clients are described and listed, so it is a relevant question for me, especially as we are in the midst of rethinking our own marketing approach.

The responses fell into 2 categories:

Response 1: A narrow majority advocated public listing of clients: They argue that potential clients want to be able to see at a glance what one’s experience has been, how widely used one is, and whether one’s client base is similar to their situation. Many respondents argued that potential clients take for granted that any professional advisor will respect a desire for discretion and confidentiality so that concern should not be a sufficient reason to choose to list none.

Response 2: A smaller group took note of the particular kind of advisory work that I do. They felt that, since I don’t manage anyone’s giving, foundation, or grantmaking, but rather only deal with underlying strategy issues, in my particular case, discretion is the better part of valor. Individuals, families, or foundation boards may not want the world to know that they sought outside counsel for their presenting issue, and by going public, it could put me in the position of having to clarify to those who inquire what the nature of the work was. Better, they felt, to err on the side of sharing relevant referrals only when appropriate. Several posited that credibility is not really a relevant factor since most of us get our business by personal recommendations anyway and not through random pursuit of competitive websites. [Is that true?]

One respondent raised a particularly interesting ethical observation: If we in our field talk about the importance of transparency, shouldn’t that extend to how we present ourselves? I wasn’t persuaded that this is where the transparency rubber needs to hit the philanthropy road, but it did make me wonder if too much discretion might make some suspicious.

For now, I have decided to continue my past practice but to do something I haven’t done before: contact past clients to remind them that I work with a limited number of folks like them. Then it would be fully up to them to decide how public or private they choose to be.

To all who offered their opinion, thanks very much. Your thoughts were much appreciated.

#328 – Aligning Donor Intent with Donor Practice: Not as Easy as it Sounds.

January 10th, 2019

Richard Marker

This post is the second of a series on “Alignment” as funders – aligning our values, our staffing, our funding, and our intentions. Clients and those who have participated in our educational offerings are well aware of this thinking, but I have not previously published these practica. Please see #328 and #330 for the other installments.

The series focuses on three necessary preconditions for the successful implementation of a funding strategy. It assumes that readers already have chosen what kind of structure in which they are making these decisions – e.g., a private foundation or a DAF or an LLC, et al. For those readers who are still deciding among those options or when to use which, please feel to be in touch directly since those choices are beyond the scope of this series.

A. About a dozen years ago, I was approached by 2 third generation family members who were struggling with a dilemma. Their grandfather’s instructions were to use the foundation to support “conservation” but didn’t want any of it to go to “environmentalism.” Even if they understood the implicit political leanings in their instructions, how to implement this was proving a challenge. After all, any meaningful “conservation” funding was, of course, a form of commitment to the environment.

B. Many readers, I suspect, are familiar with another challenge of donor intent. A foundation was created “to keep the family together” – as if a lifetime of disfunction or rivalry can suddenly be eliminated because the family members are now forced to sit at the same funding table. Money may go out the proverbial door, but just having a philanthropic vehicle isn’t likely to solve unresolved family issues.

C. A similar dilemma is seen by this not uncommon scenario. The founder wanted the family to come together to make philanthropy decisions, but the organizational recipients or the geographic parameters are so tightly structured that the successor board members are all disenfranchised before they begin. What incentive do they have to participate?

D. Recently, a foundation affirmed that they did not want to support any “social justice” initiatives, when, in fact, they have a long and continuing practice of anti-poverty funding. What might that mean in practice – now and in the future?

E. And then there are those who choose to leave their intentions unstated, freeing subsequent trustees to struggle about what, if any, guidelines should apply. Should they extrapolate from the founders’ own priorities or practices? Is that liberating – endowing future generations with complete freedom – or a sign that the founder was reluctant to face his or her own mortality? What if the kinds of funding the founder chose to do are at odds with the preferences – for whatever reasons – of successor generations? Should they be free to start their thinking de novo, as if no precedent applies? And, finally, in the absence of stated expectations one way or another, is the default assumption that a foundation should exist in perpetuity?

Since the majority of funding entities, especially foundations and donor advised funds, are personal or family oriented, the matter of donor intent is not abstract. In families, every decision is personal and how family members choose to interpret or implement donor intent[ or its absence] can be read as a commentary on his or her relationship to the family, its values, its history, and its legacy. And commentaries can be affirming or judgmental, not always endearing, to others at the table.

An approach:

As we have shown in prior articles, in most cases, differences of opinions are not necessarily reflections of character flaws at all but may simply be differing but legitimate approaches to philanthropy. I have found that one helpful way to address this is to begin the process by identifying guidelines of what should always be off limits – that is, what should never be funded – because it would have been abhorrent to the founders or would violate their stated intent.

“Negative” guidelines are often easier to address than positive ones. The process can allow wholesale dismissal of entire categories, no matter the merit or type of grant requested. It even can make procedures more efficient especially with on-line guidelines or systems. Insofar as they help address our topic, families can usually agree on these guidelines more easily than those that are inclusive. At least in my professional advisory experience, it has often proved the easiest and quickest way to get at the discussion of what should be on the decision-making table where the real hard work begins.

Problem Solving:

To illustrate the way “alignment” works, let us revisit the 5 scenarios above to see what might make sense or be helpful in each case.

A. The third generation chose to apply a “conservative” approach to their approach to “conservation.” While they fully recognized that government action can be exponentially more protective, and therefore leverage a conservation commitment, they chose to restrict their funding to the localities and regions where the family lived, and where their decisions would be respected as personal commitments. Their reluctance to engage in advocacy or larger issues was a reluctance to challenge an implied intent, even if, they acknowledged, that mission might be addressed more effectively, and more in keeping with the values of the third generation’s values and priorities through advocacy.

B. There is no single or best practice answer to this one and I suspect that any of us in this field have helped resolve the challenge in a variety of ways. Sometimes, the foundation is large enough and its reach broad enough that the family can simply delegate the operation of the foundation to staff and perfunctorily go through the motions when required. Or perhaps, to set it up so that it is a single foundation in name only but functions as multiple entities under a single rubric. The Foundation continues, but no one is forced to make joint or mutual decisions.

In other occasions, even that may prove too uncomfortable, so the family may decide to close the foundation with a limited number of larger gifts honoring the founders or, perhaps, turn the corpus over to a Donor Advised Fund [see C below.]

C. When the founder/funder tries to “rule from the grave” it invariably backfires. Some in the second generation may feel a sense of obligation to their parents, but very few in subsequent generations will. They may live in different places, have different priorities, or merely not want to waste their time pretending to make decisions that are pre-determined. This is a case where a Donor Advised Fund may be an ideal solution – at lower cost they can manage and honor the founders’ restrictions, and still, nominally at least, keep the family in the loop. [This can work as a partial solution if only some of the institutional commitments are pre-determined. It means that the family or board can concentrate their energies and attentions on matters where their deliberations matter.]

D. When the words and actions diverge, it presents a real cultural challenge to funders. As in “A”, none of us in naïve about the political leanings of the founders, so what should subsequent trustees do – especially since poverty alleviation is always about addressing unfairness and social justice?

This is a case where “alignment” needs to rely on Stage 1 of the strategy process, understanding the implicit “cultures” of the foundation and those in the room. [A process alluded to in post #326 and developed more fully in numerous prior articles.] That process, if done well, has already clarified preferences regarding risk, recognition, involvement, and more. By articulating the how and why of this foundation’s poverty alleviation commitments, it can obviate the need to rely on politically loaded terms about which trustees may disagree.

E. Unarticulated intent is both the most liberating and puzzling at the same time. It happens quite frequently. Often, an attorney is more committed to creating an estate motivated vehicle than fully exploring the philanthropic needs of the family or even the client. [You would be amazed how frequently foundation Articles of Incorporation are little more than boiler plate documents reiterating basic foundation law with virtually no attention to motivation or function.]

In my experience, this has led to a variety of responses. In more cases than one might imagine, the 2nd generation did not even know a foundation existed before the founders died. To take but one example, after a difficult few years trying to make sense of it all, the responses of the third generation proved decisive: they didn’t care where the money went – only that it afforded them the opportunity to connect as an entire family on a regular basis. Once that happened, it obviated the tensions among the 2nd Gen siblings, and led to an affirmative raison d’etre of the foundation.

In another case, an unusually magnanimous founder explicitly articulated her reasons for not formulating messages to successors. She pointed out how the world had changed in her lifetime, her perspectives had evolved over her lifetime, and her understanding of the world was certainly not the same as when she was young. Certainly, future generations would be faced with a very different world and they needed the same autonomy to face their radically changing world. In my experience, there aren’t that many folks who think that way,

Most often, the absence of donor intent serves to handcuff the successor trustees as much as it liberates.. It means that everything is on the table including how committed they need to be interpreting what might have been intended but unsaid, how long to exist, how open-ended their process, how extensive their reach, how open to risk. At the end of the process, if done properly, the successors will have developed an integrated aligned funder approach that works for them and has the impact they desire. If not, it can lead to years of ungratifying grantmaking and having much less of an impact than the resources would allow.

It is worth doing properly.

#326 – Aligning Our Funding Strategy with Our Words and Intentions: The Case of “Equity”

January 7th, 2019

Richard Marker

This post is the first of a series on “Alignment” as funders – aligning our values, our staffing, our funding, and our intentions. Clients and those who have participated in our educational offerings are well aware of this thinking, but I have not previously published these practica. Please see #328 and #330 as the next installments.

The series focuses on three necessary preconditions for the successful implementation of a funding strategy. It assumes that readers already have chosen what kind of structure in which they are making these decisions – e.g., a private foundation or a DAF or an LLC, et al. For those readers who are still deciding among those options or when to use which, please feel to be in touch directly since those choices are beyond the scope of this series.

A quarter century ago, I realized that the classic strategy process I was taught, and the one still widely used, had real limitations. It called for developing and articulating an organization’s Mission and Vision as the first step in the process. Mission and vision are fine, but why was it, I wondered, that so many of the very same disagreements and misunderstandings that existed prior to developing a mission presented themselves in the decision-making board room only hours after that Mission statement was so carefully crafted?

The insight I had then, one now widely understood and used in the field and recently much disseminated by groups such as GEO and CEP, was that culture trumps strategy. So, the challenge, I felt, was to get deeply into the underlying cultural assumptions of everyone in the room PRIOR to the decision-making process. Surfacing those cultural assumptions had the power of legitimating differing inclinations regarding philanthropic behaviors. [Mission Statements still have an important place in the strategy process, just at a different stage.]

Over the years, as 100’s of foundation clients and those who have taken workshops with me can attest, I have added levels of sophistication about how to get at those assumptions and to lead directly into the next level of decisions that every funder at every level needs to address. Over those same years, additionally, I have formulated the subsequent elements: how to align all of the pieces of strategy – culture, values, focus, capacity, and style to develop an effective implementation. That requires careful alignment of all of the factors that inform those decisions. It is this alignment that makes it all work

As a way to understand this approach, this first piece in the series will address a very contemporary challenge to all of us as funders. While not new, it has never been so crucial as now, nor ever as present in our public discourse – the role of equity in our grantmaking.

To understand this, we need to decide what we fund, how we fund, and who makes the decisions that funding – in this case, about equity.

1. The “what we fund” question seems the easiest – on the surface. After all, social justice, correcting the systemic and endemic inequities that have defined our society for generations, seems to be a no-brainer. There are differing approaches about who should have what role in redressing these ills, but only the myopic or misanthropic deny it is an issue.

a. Compassion: The challenge for most of us is where along the continuum of needs we should use our resources. Compassion may inspire many to provide food, clothing, housing, and other services that provide immediate relief. Indeed, it is typically the first stop along the funding continuum. We see results for a visible problem. Those results may not be lasting, and they are certainly not systemic, but they work – and after all, the food, clothing, or housing is needed now.

For those who desire hands-on involvement, support for their local community or neighborhood, or who want the very legitimate gratification knowing that there is a positive result of one’s personal altruism, this may be a perfect alignment of values and funding.

b. Strategic: It doesn’t take long, for many, to realize that one cannot efficiently or effectively give every homeless person some food or money, so if those categories matter, compassion funding has genuine limitations. Many look for better strategies to leverage their compassion – to feed more people, to house more people, to clothe more people. When we ask the questions of effectiveness and efficiency [and they are NOT synonyms], it leads us to look for organizations that provide those direct services in better ways than we can do ourselves. Our motivations, to make a difference that goes beyond our own individual funding capacity, leads us to examine alternative methods and organizations. This process requires that we need and use additional skills and approaches to make our decisions and lead us to consider a variety of competing claims. For those willing to defer the immediate gratification of direct funding for the satisfaction of a broader and more comprehensive reach to address these same human problems, and willing to put more time and energy into making hard decisions, strategic funding is an important approach.

c. Systemic: Strategic approaches have the advantage of helping make good choices among competing organizations. Not every organization is equally adept at delivering services and not every organization does so in a way consistent with the approach of a given funder. But, for many, even strategic funding is insufficient. For systemic thinkers, the question is not which organization provides food or clothing or housing most effectively, but rather how to eliminate the need for those services at all.

Once one begins to approach questions of equity systemically, it becomes evident that most issues require a multi-sector approach and are not simply a matter of choosing between the best available option. If someone is homeless, it reflects a confluence of failures. A solution also requires a convergence of interventions. No single entity, indeed, no single sector, can deal with the large issues of homelessness, food insecurity, long term economic disparity, education, and, of course, poverty. Each requires public policy responses, private sector investments, social service expertise, and community development organizations – in addition to private philanthropy.

Aligning these efforts is no small task – failures far outnumber successes. Funders need patience, mediating skills, advocacy, a willingness to surrender some autonomy, and a tolerance for failure. A full self-awareness of the elasticity and parameters of one’s funding culture and style are preconditions. If these larger systemic challenges align with your comfort level, it opens up the possibility of addressing and perhaps making a permanent dent in society’s more resistant challenges. If, though, you don’t bring those attributes to the table, it is likely that this kind of funding will prove frustrating and unsatisfying. Alignment matters.

All three of these funding approaches legitimately count as equity funding but not all will work for every funder. Thus “alignment.”

2. How we fund is about the methods we use to get the information we need and then how we make our choices. After all, any subject as big as “equity” has many players, and at many levels, and there are very legitimate competing claims for our resources..

[There is no end to information we can gather about potential grantees, but much of it is not useful, or won’t really be used to make a decision. If you would like further advice about how to understand and effectively utilize the kinds of information that can inform our choices, please be in touch directly. That is beyond the scope of this series.]

Depending on how open or controlling we wish to be in our grantmaking, how competitive or funder pre-determined our method, will help lead to our approach for getting proposals in our docket. As we will see in #330, much of this directly relates to our preferences or choices about staffing, but it also reflects different preferences about how we wish to spend our time, how open we are to innovation, how committed we may be to certain organizations, and what relationship we wish to have with grantees.

There is no single correct/right way to do this, and indeed many funders use multiple approaches. What is clear, though, is that if we are never open to new ideas or explorations from organizations we have never funded, our own knowledge can easily become stale. And since equity has historically been so elusive to achieve, it would be quite shortsighted to presume that our past approaches are sufficient or our knowledge complete.

The implications for equity funding are very real. Those who are committed to established organizations are more typically [not always] more risk averse, and more likely to want to establish or maintain direct involvement with a limited number of organizations. Their confidence in those organizations makes it more likely that core support will be provided, or that new projects will be developed collaboratively. They are more likely to use evidence-based criteria, and it is likely that any projects they fund will succeed albeit in a strategic and not systemic way.

Except for the deepest pocketed funders, this also, typically, leads to organization that are either geographically or ideologically very close to the funders. Very very few funders have the in-house expertise to determine organizational effectiveness all over the place. Similar to the above, it leads to a likelihood to provide operating grants or core support and to be committed to the strength of the organization as a necessary precondition to reducing inequity in the field in which that organization works.

However, as we have stated above, we also know that there are problems that can only be addressed systemically, at scale, and with equal parts guts and patience. Funders open to partnerships and collaborations, willing to take big risks, and accept uncertainty are more likely to fund this way – and therefore will customarily choose to use a more varied process for obtaining potential grantees and projects. If one wants to get at the underlying causes of poverty or the seemingly ineradicable racism in American society, equity issues if there ever were any, we will likely broaden the sources of information, expand the scope of the thinking, and look for intersector opportunities before proceeding. This will usually demand a much longer time frame for decision making and be much more committed to using a not yet proven theory of change.

The alignment issue is quite clear in these examples. At different stages along the way, a funder is in or out, has comfort or doesn’t, considers the challenge within their scope of focus or not. What matters is being sufficiently self-aware to make the choices that will work best.

3. Who makes the decision: For those who have been on the funder side of the table for more than a while, this may seem to be a strange question. After all, one of the hallmarks of private philanthropy is the autonomy it allows. All sorts of people might be invited to have opinions or share their expertise, but the decision about who makes the decision where to give the money is [was] clear – and not terribly negotiable.

The “equity” question, though, forces a different reckoning – and it is here where debate is rampant in our field. And for good reason. Philanthropists and foundations are reflective of the haves. There is an implicitly patronizing element to our work – no matter how genuine and beneficent our affect and intentions. We traditionally give TO those who need it – or, more accurately, to organizations who know who needs it. How often are our recipients in the room, in any of our decision-making rooms?

If one wishes to reduce the divide and responsibly work toward social justice, it means, many now say, that funders need to take seriously the new mantra “nothing about us without us.” They would argue that the real change that must take place is not that money needs to be allocated with care, but who actually makes the decision.. This equity argument has both a practical side [“who knows better than we…”] and a justice side [“who are you to decide what is best for me…”].

Even if one fully endorses that empowerment should be a given, it is far from a given where in the continuum of decision-making that empowerment ends. The arguments range from full surrendering/delegation of decision-making to the impacted stakeholders to making sure that they have seats at various tables along the way.

From a philanthropy perspective, it is far from easy. Succession and surrendering control have proven hard enough when the successors are family. To go so far as to say that the only true social justice philanthropy is surrendering decision making to what had previously been the “recipient class” is a profound and radical leap.

Yet if one is committed to addressing systemic inequities, and eradicating destructive class and financial divides, it is a discussion that one must have.

Alignment in #1 and #2 above are making sure that our way of being funders works best – for us. #3 reminds us that none of our decisions is made in a vacuum. Each has implications not only for how we do our work, but what our values and funding stand for. That is never easy…but always important.